ALBERTA INDUSTRY Q U A R T E R L Y UPDATE

sUMMER 2012 Reporting on the period: March 14, 2012, to June 25, 2012 2 NATURAL GAS INDUSTRY QUARTERLY UPDATE

Natural gas has been a key part of the But there’s more to the province’s natural Canadian economy and energy mix for gas industry than drilling wells and many decades, and the Western Canadian producing resource, as to make it accessible Sedimentary Basin (WCSB)—and more to Albertans and for export to other markets, specifically Alberta—has led the way. a vast infrastructure network is required. Approximately 97 per cent of all oil and is the third-largest natural gas All about gas products move by pipelines in Canada, producer in the world, with about 80 per cent representing more than three million of the country’s gas being produced in natural gas barrels of crude oil and over 15 billion cubic Alberta. In 2010, Alberta produced 4.1 trillion feet flowing every day through Canada’s cubic feet of marketable natural gas, including Background of an important 580,000 kilometres of pipelines. And this production of approximately 3.8 trillion cubic western Canadian resource vital transportation network is centred feet from conventional sources and 0.3 trillion largely in Alberta. cubic feet from coalbed methane (CBM). Approximately 70 per cent of natural gas According to provincial figures, at the end produced in Alberta is exported to other of 2010, remaining established reserves of provinces and the United States. Alberta conventional natural gas stood at 36.4 trillion is the largest supplier of natural gas to the cubic feet while remaining established CBM United States and currently delivers all of gas reserves stood at 2.4 trillion cubic feet. its exports (excluding Canadian provinces) Reserve additions as a result of new drilling to its southern neighbours, the majority of replaced 46 per cent of 2010 gas production. which goes to the Midwest. Disposition of The province estimates the remaining Alberta’s natural gas production in 2010 was ultimate potential of marketable conventional approximately: natural gas at 74 trillion cubic feet. • 45 per cent to the United States; Although conventional natural gas remains • 29 per cent within Alberta; and a very important part of western Canadian production and Canada’s natural gas supply, • 26 per cent to the rest of Canada. TABLE OF CONTENT S a new era is upon us. The industry has now Alberta’s natural gas pipelines deliver natural advanced new technology, such as horizontal gas across the provincial border to the drilling and multistage fracturing, to the point Canadian Mainline, B.C. System, the Foothills All about natural gas 02 that allows for development of natural gas System and others, connecting provincial from a new source—unconventional natural energy production to locations as far away gas resources. Aside from CBM, Alberta’s as the ports of Metro Vancouver and Prince unconventional natural gas resources Mapping natural gas Rupert and various hubs in the United States. 03 include tight gas (natural gas trapped in low-permeability sedimentary rocks, such There are over 392,000 kilometres of as sandstone or limestone) and shale gas energy-related pipelines (including oil and (trapped in shale rock). natural gas) as well as extensive storage Government update 04 facilities in the province. This infrastructure is The Canadian Society for Unconventional an essential lifeline linking Alberta’s natural Resources has estimated that the gas resource to national and U.S. markets. recoverable, marketable portion of Canada’s 06 What’s new in natural gas unconventional resource is from 376 trillion On the environmental front, Alberta has cubic feet to 947 trillion cubic feet. Remaining received international attention for its gas in place in conventional reservoirs is successes in natural gas flaring and venting estimated to be 692 trillion cubic feet, and reductions. Since 1996, solution gas flaring Facts & Figures 10 357 trillion cubic feet of that resource is in Alberta has been reduced by 76 per cent. expected to be recoverable and marketable, In 2007, the upstream oil and gas industry with a total marketable resource from both conserved nearly 96 per cent of all solution Glossary of conventional and unconventional resources of gas produced in Alberta for use and sale, 14 natural gas terms 733 trillion cubic feet to 1,304 trillion cubic feet. rather than flaring and venting it. Most of the unconventional natural gas By reducing the amount of natural gas resources occur within the WCSB, a thick that is wasted, Alberta helps ensure that it package of oil- and gas-prone rocks that cover makes the most effective use of its natural much of Alberta, , parts of gas resources, and continues the province’s , southwestern Manitoba and record as one of the global leaders in conservation and flaring reductions. ■ All photos © 2012, northwards into the Northwest Territories. JuneWarren-Nickle’s Energy Group ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE 3

Natural Gas Fields 100 Kilometres 0 10 20 30 40 50 60 70 80 90 100 Oil Sand Deposits Oil Fields

Coal Fields Mapping National Parks Capital of Alberta natural gas

Alberta’s natural gas bounty is plentiful and is produced from both conventional and unconventional reserves. While the vast majority of the province’s natural gas is still produced from conventional sources, growing natural gas volumes from coal, shale and tight formations will FORT MCMURRAY also be strong contributors going forward. PEACE RIVER Alberta has a large natural gas resource base, with remaining established reserves of about 39 trillion cubic feet and estimated potential of up to 500 trillion cubic feet of natural gas from the coalbed methane resource. In addition, a large- scale resource assessment of shale gas potential in Alberta is underway and could significantly add to the natural gas prospects for the province.

EDMONTON

LLOYDMINSTER

RED DEER

Cross-section of the Western Canadian Sedimentary Basin

Metres 3,000 2,400 1,800 NO CALGARY CALGARY 1,200 OIL OR GAS FORT MCMURRAY 600 0 OIL AND GAS -600 -1,200 OIL AND GAS -1,800 NO -2,400 Limestones and Dolomites OIL OR GAS -3,000 -3,600 Sandstones and Shales MEDICINE HAT BRITISH COLUMBIA ALBERTA SASKATCHEWAN LETHBRIDGE -4,200 Granites

Map does not include shale gas deposits. Deposits For a breakdown of coal, shale and tight gas deposits in , please see page 10. 4 ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE

Government update

NEW CABINET TEAM FOCUSED ON GROWING with poor or no credit history to have access to fixed-rate ALBERTA’S FUTURE contracts by negotiating a deposit with energy marketers Premier Alison Redford recently named a new Cabinet, according to rules set out by the regulation. focused on providing a strong fiscal framework, caring for all Under the regulation, these deposits must be returned within citizens and promoting responsible resource development. one year and door-to-door marketers are prohibited from One significant change is the creation of the position of collecting cash deposits. Marketers will also be required deputy premier. Thomas Lukaszuk, MLA for - to fully refund deposits to consumers who cancel the Castle Downs, will also chair the operations policy committee contract during the regulated cooling-off period of 10 days that ensures that policies reflect Albertans’ needs and that for contracts signed at the door or over the Internet and 60 government consults regularly with Albertans. days after the first billing for consumers who sign up over the phone. Enabling more choices for consumers is yet another This streamlined structure will allow Doug Horner, president way the Alberta government is addressing volatile electricity of treasury board and minister of finance, to focus on one prices while maintaining strong consumer protection. of the premier’s main priorities: results-based budgeting. Ken Hughes has been appointed as Alberta’s new energy The new rules give Albertans immediate access to minister. The departments of Environment and Sustainable competitive fixed-price contracts. This amendment directly Resource Development have been merged and will be led by fulfils one of the goals of the premier’s four-point plan to Diana McQueen. help address both the volatility and costs associated with electricity. The other three goals of this plan include a review The new Cabinet will take the helm of a revitalized of the variable regulated-rate option, a freeze on ancillary government structure that will target three priority areas: costs on power bills, and the extended mandate for the • Investing in families and communities—supporting healthy Alberta Utilities Commission to encourage efficiencies and and strong families and communities is an investment in lower prices. Albertans and Alberta’s future; • Securing Alberta’s economic future—making strategic investments in both human capital and infrastructure NEB ANNOUNCES HEARINGS ON NGTL’s NEXT to strengthen Alberta, grow our knowledge-inspired MODEL IMPLEMENTATION economy and improve Alberta’s competitiveness in the The National Energy Board issued a hearing order on May 4, global marketplace; and 2012, starting the process to hear an application by NOVA • Advancing world-leading resource stewardship— Gas Transmission Ltd. (NGTL) for approval of amendments developing our natural resources responsibly to protect to the NGTL Gas Transportation Tariff. our environment and grow our markets. The applied-for amendments would implement the Natural The spring sitting of the Alberta Legislature began on Gas Liquids Extraction Rights model for the administration May 23, 2012. of natural gas liquids extraction on the Integrated Alberta For full text of announcement, please go to System (the integrated systems of NGTL and ATCO http://alberta.ca/NewsFrame.cfm?ReleaseID=/ Pipelines). acn/201205/322862DD7B1D9-AA32-9F78- Among the issues the board expects to consider are the 02192F6786E99742.html purpose for implementing the model, any positive or negative impacts of implementation, compliance with the National Energy Board Act and how the model will be implemented. GOVERNMENT IMPROVES VULNERABLE ALBERTANS’ UTILITY CHOICES The Alberta government is helping ensure vulnerable FOCUS FOR NATURAL GAS DRILLING SHIFTS TO NGLs consumers will have more choices in Alberta’s energy The high value of natural gas liquids (NGLs) products market, including competitive electricity and natural gas that can be recovered while producing natural gas is contracts with fixed rates. Premier Alison Redford’s plan encouraging companies to seek out deposits rich in these ensures that consumers have options available to give them compounds as opposed to dry gas plays, says a recent more stable and predictable electricity prices. energy market assessment from the National Energy Board The Alberta government amended the Energy Marketing and (NEB). NGLs include such compounds as propane, butane Residential Heat Sub-metering Regulation to allow Albertans and pentanes plus. ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE 5

In the report, Short-term Canadian Natural Gas Deliverability Canadian demand is projected to increase from 8.9 billion 2012-2014, the NEB examines trends for natural gas cubic feet per day in 2011 to 9.8 billion cubic feet per day deliverability in Canada (the ability to produce natural gas in 2014. Most of the increase would come from a boost in from new and existing wells). demand from oil sands development in Alberta, according This report includes lower-, mid- and high-range price to the report. Oil sands operations use natural gas to create cases for natural gas based on varying market factors. The heat and steam to separate the oil from the sand. Natural mid-range price case expects natural gas deliverability gas–fired power generation is competing with some of the to decrease from 14.5 billion cubic feet per day in 2012 to older and less-efficient coal-fired units in some markets, 13.2 billion cubic feet per day in 2014. which increases gas demand and could gradually reduce the The board projects annual Canadian natural gas oversupply situation. demand to grow by 600,000 million cubic feet per day between 2012 and 2014. Most of this increase in natural gas demand would be from increased usage for oil sands ERCB ISSUES REPORT ON ALBERTA GAS EFFECIENCY development in Alberta. IN THE UPSTREAM GAS AND CONVENTIONAL OIL INDUSTRY The Energy Resources Conservation Board (ERCB) CANADIAN NATURAL GAS PRODUCTION SEEN conducted a study evaluating the efficiency of Alberta’s FALLING AS DEMAND RISES: NEB STUDY oil and gas industry and made projections for the future Canadian natural gas deliveries could drop as much as of this industry. The report contains two major parts. Part 2.6 billion cubic feet per day from 2011 to 2014, as one consists of provincial statistics largely summarized drilling activity slows in dry gas plays and prices remain from Petroleum Registry of Alberta data. Part two contains low, Canada’s National Energy Board says in a new information from a survey of the top 20 fuel gas consumers. report. The report also predicts Canadian gas demand The upstream oil and gas industry represents a significant will rise nearly one billion cubic feet per day to 9.8 opportunity for companies in terms of both improvement and billion cubic feet per day over the same period. The efficiency in savings. slowdown in estimated marketed gas production is tied Part one of this report found that annual gas production and to low gas prices and producers’ focus on higher- gas plant receipts held fairly steady until about 2006 before priced liquids. declining year-over-year. The decline in gas production, due The report presents different scenarios depending on the to higher costs moving gas to markets, contributes to lower future price of natural gas. facility utilizations and operating pressures. Gas production In the lower-price case, where gas remains below 2011 is declining in part due to lower energy prices. Low prices are levels for the next three years, deliverability in Canada detrimental to fuel gas efficiency project economics. would drop from 14.6 billion cubic feet per day in 2011 to In part two, the ERCB surveyed the top 20 fuel gas 12 billion cubic feet per day in 2014. This scenario assumes consumers, representing 76 per cent of the fuel gas a continuation of oversupply conditions due to “significant consumed in the upstream gas and conventional oil industry. contributions” from solution gas, associated gas and more The 17 fuel gas consumers who responded were asked to share liquids-rich gas production in the United States, says the how they were making decisions on fuel gas efficiency projects, study. It also states that the potential transition toward oil and to describe the successes and challenges they have had and away from natural gas would tend to shift some capital while improving fuel gas efficiency and reducing fuel gas use. investment away from gas-prone British Columbia and into oil-prone Saskatchewan, while the impact would be mixed In 2011, companies estimated the largest savings to be in the in Alberta. areas of consolidation and evaluations, waste heat recovery and compressors. For some companies, the most economic In the report’s higher-price case scenario, there would projects may have already been implemented, but changing be a closer balance between supply and demand and an operating conditions will provide new opportunities for eventual move back toward drilling for dry natural gas. That future savings. Programs, motivators and areas to reduce case assumes prices rise to $6 per million British thermal fuel consumption were identified, along with ways to reduce units by 2014. With those higher prices, deliverability of barriers to implementation. would decline from 14.6 billion cubic feet per day in 2011 to 13.6 billion cubic feet per day in The complete report is available online at the ERCB website 2014, the report says. (www.ercb.ca). 6 ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE

What’s new in natural gas

NEW REPORT OUTLINES WAYS TO BOOST pipeline that will transport natural gas from the Montney gas- ECONOMICS OF UNCONVENTIONAL GAS producing region near Dawson Creek, B.C., to the recently In response to low natural gas prices and the economic announced LNG Canada liquefied natural gas export facility challenges this is causing in western Canada, the industry near Kitimat, B.C. must examine and implement improvements that will The LNG Canada project is a joint venture led by Shell, with effectively lower development and operational costs, partners Korea Gas Corporation, Mitsubishi Corporation according to a new study released in May. and PetroChina Company Limited. The project was officially announced May 16, 2012. Shell and TransCanada are working The technical study, produced for Productivity Alberta by toward the execution of definitive agreements on the Coastal authors Mike Dawson, president of the Canadian Society for GasLink project. Unconventional Resources; Peter Howard, president of the Canadian Energy Research Institute; and Mark Salkeld, president “We look forward to having open and meaningful of the Petroleum Services Association of Canada, was put discussions with aboriginal communities and key together to highlight possible operational practices and protocols stakeholder groups, including local residents, elected that will improve the productivity of operations to help in the officials and the Government of British Columbia, where economic development of unconventional gas projects. we will listen to feedback, build on the positive and seek to address any potential concerns,” said Russ Girling, “The concept of project development and employing the TransCanada’s president and chief executive officer. multi-well concept can accommodate many of the processes identified,” the report stated. “Coastal GasLink will add value to British Columbians, particularly Aboriginals and communities along the It noted that while some of the larger companies have conceptual route, by creating real jobs, making direct embraced a number of the processes, there are a large investments in communities during construction and number of operators that are still conducting exploration providing economic value for years to come.” based on the one-well, one-location mindset. TransCanada currently has approximately 24,000 kilometres “This approach does not enable cost savings to be achieved of pipelines in operation in western Canada including 240 and in many cases relies on a drilling window approach for kilometres of pipelines in service in northeastern British services,” the report said. “Many junior companies, who Columbia, with another 125 kilometres of proposed additions may have a limited inventory of well prospects and a limited either already having received regulatory approval or exploration budget, rely on acquiring their service providers in currently undergoing regulatory review. These pipelines form small windows of opportunities when the equipment comes an integral and growing part of TransCanada’s NOVA Gas available from larger projects.” Transmission Ltd. (NGTL) System. The company also owns In this scenario, often the oil and gas company that is relying other natural gas pipelines that have been safely operating on this window to drill and complete their one well will not in British Columbia for more than 50 years as part of its only be time constrained, but also will not realize the cost Foothills pipeline system. savings of a multi-well drilling program, the report said. “Business evolves over time and in response to market needs,” “We all recognize there are some significant challenges in the said TransCanada spokesman Shawn Howard. “Coastal oil and gas sector right now, particularly in the gas sector,” GasLink is a large market-driven project and it makes sense Dawson said. “We see it in terms of prices; we see it in terms of for us to be involved in it. The interconnectivity with the NGTL companies shifting their focus away from dry gas opportunities.” makes good sense for all stakeholders in our system.” While the industry is looking at global opportunities through The potential Coastal GasLink pipeline project includes liquefied natural gas exports off the West Coast, he pointed out a receipt point near Dawson Creek and a delivery point that realistically won’t happen until 2015 or 2016 at the earliest. at the proposed LNG facility near Kitimat. Natural gas supplies will come from B.C.’s Montney, Horn River “What can we do to try and improve or help the industry, and Cordova basins and elsewhere from the Western particularly the gas industry, in the short term, over the next three to Canadian Sedimentary Basin. The pipeline length will four years? That’s what this study was looking at,” Dawson noted. be 700 kilometres of large-diameter pipe with an initial capacity of over 1.7 billion cubic feet per day. TRANSCANADA SELECTED TO BUILD AND OPERATE It is estimated the project will create between 2,000 and $4-BILLION LNG PIPELINE 2,500 direct construction jobs over two to three years. TransCanada Corporation has been chosen by Shell Canada Detailed cost information will be developed following Limited and its partners to design, build, own and operate the completion of project scoping and planning. The current proposed Coastal GasLink project, an estimated $4-billion estimate is approximately $4 billion. ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE 7

Applications for required regulatory approvals are expected to The 220-page study, Integrated Tight Gas and Duvernay be made through applicable provincial and federal processes. Growth Resource and Infrastructure Analysis in Alberta, covers The estimated in-service date will be toward the end of the the /Wapiti, Simonette, Kaybob, Whitecourt, decade, subject to regulatory and corporate approvals. Edson, Rosevear and Hanlan areas. In addition to the transportation of B.C. natural gas to the “It focuses on optimizing capital, operating expenses, product West Coast, Coastal GasLink will provide options for shippers recoveries, and cycle times as if the team owned all the to access gas supplies through an interconnection with the resources and assets,” said Bill Gwozd, vice-president of gas NGTL System and the liquid NOVA Inventory Transfer trading services for Ziff and a study co-author. hub operated by TransCanada. “The Duvernay and the Montney in the area present exciting A proposed contractual extension of TransCanada’s NGTL opportunities to develop and grow significant new gas System using capacity on the Coastal GasLink pipeline, to and natural gas liquids production through 2020,” said a point near the community of Vanderhoof, B.C.—about Armstrong. Gas production from those areas is expected to an hour’s drive west of Prince George—will allow NGTL increase by 50 per cent to six billion cubic feet per day by to offer delivery service to its shippers interested in gas 2020, even in the current low price environment, it found. transmission service to interconnecting natural gas pipelines serving the West Coast. NGTL expects to elicit interest in and commitments for such service through an open-season REPORT SAYS PETROLEUM INDUSTRY WILL NEED TO process in late 2012. FILL AT LEAST 9,500 JOBS BY 2015 Canada’s oil and gas industry will need to fill a minimum of GAS PROCESSING STUDY POINTS TO VALUE OF 9,500 jobs by 2015, according to a report released in May by INDUSTRY COORDINATION the Petroleum Human Resources Council of Canada. Better utilization of surplus gas-processing capacity in Highlights from the report, Canada’s Oil and Gas Labour Market northwestern Alberta could significantly reduce capital and Outlook to 2015, state that between now and 2015, Canada’s operating costs and increase recoveries from the growing oil and gas industry is at risk of losing about three per cent tight natural gas and liquids-rich Duvernay plays, a new of its workforce overall, because of persistently low natural study has concluded. gas prices. However, two primary factors—growth in certain operations and age-related attrition across the industry—will The joint multi-client study by Ziff Energy Group and Gas offset most job losses and in fact contribute to increased Processing Management Inc. (GPMI) has identified specific overall hiring needs. opportunities to reduce capital investment by $2.7 billion through 2020 with coordinated industry development. At Changes in the number of jobs will not be equal across all the same time, area competitiveness could be improved industry sectors. For example, the oil and gas services sector, with a $170-million annual reduction in gas plant operating although impacted by commodity price volatility, will still expenses and maintenance capital, it found. need to fill about 5,400 jobs between 2012 and 2015. “We are happy with the interest that has been expressed by The exploration and production sector, hardest hit by prolonged the major players, and we are hoping that the prize that we low natural gas prices, may see some workforce contraction but will are able to develop at a high level will provide some impetus also experience skill and experience gaps as it loses workers due to to do some things,” Bill Armstrong, a GPMI principal and one retirements and turnover, especially for industry-specific roles. of the study’s co-authors, said in an interview following the By 2015, employment in the oil sands sector is projected to release of the study. “But really, the hard work is yet to be increase by 29 per cent over 2011 levels, or approximately done, and it has to be done by the producers and processors 5,850 jobs. The pipeline sector will add about 530 jobs over themselves. the same period. Both sectors will also need to do significant “We have had lots of interest and everybody agrees that hiring to replace retiring workers and for turnover. it’s worthwhile doing; it’s just hard to get the ball rolling,” he “This is a complex labour story,” said Cheryl Knight, executive added. However, it also will take more effort and cooperation director and chief executive officer of the Petroleum Human and could take more time to do these sorts of things, Resources Council. “Hiring will increase, but total number of Armstrong acknowledged. jobs will remain relatively flat. Certain sectors and operations “The impetus is to get started on it,” he said. “My feeling is will add jobs, while others will lose some positions. And that if we don’t start along a different path, we will lose the employee turnover is the wild card that could have recruiters opportunity to do that and people will get into doing it the working to fill hundreds of additional job openings over the next same way we have always done it.” four years. ➤ 8 ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE

“At a more granular level, we’re seeing high demand for—and JAPANESE COMPANY INVESTS $600 MILLION FOR reduced supply of—skilled workers in specific occupations, CBM DEVELOPMENT many of which are unique to the oil and gas industry. Encana Corporation has reached an agreement with Toyota Retirements are the greatest cause of this growing skill and Tsusho Wheatland Inc., a subsidiary of Toyota Tsusho experience gap. The technical capabilities and knowledge of Corporation, which will see the Japanese company invest retiring, experienced workers are just not easily replaced by approximately C$602 million to acquire a 32.5 per cent royalty new entrants.” interest in natural gas production from a portion of Encana’s Canada’s Oil and Gas Labour Market Outlook to 2015 includes coalbed methane (CBM) resource play. labour-demand projections for 38 core occupations in The agreement includes production from a total of about 5,500 Canada’s oil and gas industry within four industry sectors existing wells and potential future drilling locations in southern Alberta. (exploration and production, oil sands, oil and gas services, and pipeline). Analysis is also provided for key operating regions in “This investment from a global partner recognizes the significant western Canada (British Columbia, Alberta and Saskatchewan) value identified in Encana’s CBM lands, which rank among the as well as for the rest of Canada. company’s lowest-cost, lowest-risk assets and signifies another step as Encana pursues a range of opportunities to manage its portfolio and enhance the long-term value creation of its vast ALTAGAS SEEING GROWING NATURAL GAS DEMAND inventory,” Randy Eresman, president and chief executive officer, AltaGas Ltd. said natural gas demand is on the rise for power, said in a prepared statement. industrial use and trucking, and prices will likely eventually The company’s CBM resources cover a great expanse that increase but they will never again reach their historical peaks. includes approximately 2.1 million net acres in the Horseshoe The company is expecting “modest” gas price increases Canyon fairway. The vast majority of this acreage is fee lands, through 2014 with the potential for hikes if and when where Encana holds the mineral rights in perpetuity, and liquefied natural gas (LNG) exports begin, but gas prices are estimated to contain significant amounts of recoverable won’t return to “the heydays of $8–$10 [per] thousand cubic natural gas. This relationship with Toyota Tsusho offers strong feet. We think the resource is just too large to see that type synergies that have the potential to foster expanded business of price increase,” said David Cornhill, chairman and chief opportunities, he added. executive officer. “Further, this agreement serves as a model for other AltaGas is seeing an increase of four to seven billion cubic feet investment opportunities and supplies capital investment per day in power demand for natural gas in North America due to preserve the value and efficient development of Encana’s to its economic edge over coal, as well as industrial growth, he shallow gas lands in Alberta that have contributed long life told the company’s annual general meeting. production for more than five decades,” Eresman added. The company is forecasting the need for 2,200 megawatts of new power generation in Alberta over the next 10 years to Encana has been selling midstream assets, inked a joint offset growth and the retirement of several coal-fired plants venture deal and is looking for more. Earlier this year, the starting in 2017, and it will be mainly natural gas that will fill natural gas producer said it was executing its plan to leverage that void, Cornhill told the meeting. the exploration and development of certain of its oil- and liquids-rich assets through partnership opportunities designed “Petrochemicals are back and a lot of the industries that moved to maximize recognition of the value inherent in its large asset off the continent are looking to come back with the cheap base. In February, the company completed the Cutbank Ridge natural gas,” he said. partnership agreement with Mitsubishi Corporation. The Compressed natural gas is a growing fuel of choice for long-haul company also sold off interests in the Cabin Gas Plant. truckers, the meeting heard. AltaGas is becoming quite active in Nova Scotia’s trucking industry and the company is looking for In a press release, Toyota Tsusho said it regards North America additional opportunities in Alberta and British Columbia. as a strategic business region for building a natural gas value chain through transactions. It noted that growing supplies may “The big wild card is LNG export. Whether it’s on the Gulf or “serve as a future LNG [liquefied natural gas] source for Japan the West Coast and clearly in the 2015 time frame we could in the near future.” start seeing significant gas moving offshore through LNG,” Cornhill told the meeting. The Japanese company added that unlike many CBM projects around the world, Horseshoe Canyon coals do not produce water Demand growth could be surprisingly fast, but the question is and production can be developed without environmental concerns when will that demand meet supply and when will there be a price reaction, he added. and costs related to dewatering of the coals prior to production. Between the construction of power plants, gas plants, pipelines “In addition, Encana’s world-class experience and technical and LNG facilities, AltaGas estimates that more than $35 capabilities in CBM projects reduce business risks.” billion will be spent over the next seven to 10 years on LNG Encana, along with Apache Corporation and EOG Resources, development in British Columbia, said Cornhill. Inc., are part of the KM LNG Operating General Partnership. ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE 9

The group proposes to construct an LNG export facility near ending March 31. The broker paid $7.52 million, an average of Kitimat, B.C. A final investment decision is expected this year. $2,423.47, for a parcel around 94-B-16. The project received its 20-year export licence approval from WestFire Energy Ltd. produced the top bonus in Saskatchewan the National Energy Board late last year. during the period, paying $1.76 million for a parcel around 26- Under the agreement, Toyota Tsusho paid $100 million with the 19W3, which produced an average price of $6,781.99. closing of the transaction in April and will invest approximately $502 million over seven years to acquire a 32.5 per cent royalty interest, before deductions, in production from approximately RECORD NATURAL GAS STORAGE VOLUMES FORECAST 4,000 existing wells and approximately 1,500 potential future Natural gas production levels are expected to continue to surpass drilling locations. peak North American storage levels heading into the summer These wells are located in an area covering about 480,000 injection season, putting further pressure on gas prices, said AJM net acres along the eastern edge of the Horseshoe Canyon Deloitte in a report in which it reduces its gas price forecast. fairway—an area that represents about 24 per cent of Encana’s By the start of the next withdrawal cycle in November there total CBM net acreage. The existing wells on these lands are will be an unprecedented 900 billion cubic feet of Canadian currently producing a total of about 120 million cubic feet gas in storage, exceeding the three-year maximum average of equivalent per day of natural gas. about 625 billion cubic feet, said the company. A mild winter, The area contains approximately 480 billion cubic feet continuing growth in supply and a weak economic recovery did equivalent of proved-plus-probable reserves and 140 billion little to draw down the record high levels of storage heading into cubic feet equivalent of best-estimate economic contingent this past winter, it noted. resources as of Dec. 31, 2011. Under the agreement, Encana will “Even the estimation of a colder winter over 2012-13 will not be operator and Encana and Toyota Tsusho have established a significantly reduce storage levels to impact any noticeable price management committee that will provide overall supervision recovery into next year,” it said. “Until there is a clear indication and direction of development operations. of a sustained return to growth in the U.S. economy, there will “Our integrated CBM wells produce low-pressure, sweet be limited increase in demand on the industrial usage side of the natural gas that is essentially pure methane, and as a result is equation, thus maintaining a low natural gas price.” a cleaner energy source, producing the fewest emissions of As a result, AJM Deloitte is forecasting an AECO gas price of any hydrocarbon—a natural gas resource capable of delivering C$2.30 per thousand cubic feet and a NYMEX price of US$2.80 long-term, affordable energy supplies to domestic and export per thousand cubic feet for the remainder of this year. Moving markets,” Eresman said. into 2013, it has an AECO price of C$3.20 per thousand cubic feet and a NYMEX price of US$3.50 per thousand cubic feet. With continued moderate growth over the next decade for ALBERTA KING OF FIRST-QUARTER LAND SALE BONUS BIDS natural gas prices, the long-term forecast is reached by 2021 in Scott Land & Lease Ltd. was the top land buyer in the first real terms, with AECO at C$6.20 per thousand cubic feet and quarter, spending $137.37 million in the three months ending NYMEX at US$6.50 per thousand cubic feet. March 31 on behalf of unknown producers, with $102.58 million The first quarter of 2012 offered little comfort for natural gas of that spent in Alberta. producers who saw a sub-$2-per-gigajoule AECO price in March Overall, companies bought the rights to 840,612 hectares in the as an early spring reduced the demand for natural gas for heating. first quarter, spending a total of $428.39 million in bonus bids at Spot prices at AECO for the first three months of 2012 averaged an average of $509.62. The lion’s share of bonus revenue was $2.05 per gigajoule, the lowest since the third quarter of 1998 spent to acquire land in Alberta where the province collected when gas fetched $1.93 per gigajoule. In March, the price fell $310.69 million in bonus bids. to $1.72 per gigajoule from $2.04 per gigajoule in February and Ranking second overall in terms of land purchasers was Standard $3.52 in March 2011, drops of 15.68 per cent and 42.67 per cent, Land Company Inc., which spent $59.07 million in total bonus respectively. April’s price was the lowest since February 1998 bids to acquire 100,610 hectares at an average of $587.14. when gas averaged $1.64 per gigajoule. The top producer acquiring land under its own name was NYMEX near-month prices showed a similar decline, averaging Progress Energy Resources Corp., which spent $19.32 million US$2.52 per million British thermal units (mmBtu) in the first for 3,092 hectares at an average of $6,247.04. All of that land quarter, down 48.57 per cent from $4.20 in the 2011 quarter. was acquired in British Columbia. The company’s acquisition of March’s average price of $2.30 per mmBtu was off nine per cent nine leases for $18.62 million highlighted B.C.’s March land sale. from $2.53 per mmBtu in February. Top bonus paid for a single parcel during the quarter was $8.67 The growing volumes of natural gas in North America are million, which was submitted by Ranger Land Services Ltd. at also raising concerns about storage capacity with Canadian Alberta’s February sale for a licence at 67-08W6. Windfall Enerdata reporting recently that Canadian storage facilities Resources Ltd.—which is held by Scott Land—produced were 69.2 per cent full compared to a year earlier when they the top bonus in British Columbia during the three months were at 27.7 per cent of capacity. 10 ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE

Facts & Figures Recent information and statistics on the natural gas industry As of June 2012

Coalbed methane SHALE GAS TIGHT GAS

Edmonton Edmonton Edmonton

Coalbed methane (CBM): Quicksilver Resources Inc. and other a few test wells in 2001 to more than 16,000 The Alberta Geological Survey estimates there companies are still drilling CBM wells. producing connections [wells] in 2010.” may be up to 500 trillion cubic feet of natural Encana’s second-quarter 2011 CBM Currently, 86 per cent of producing CBM wells gas in Alberta’s coals. It is not known how production was 476 million cubic feet are in the Horseshoe Canyon. In 2010, CBM much of this gas may be economic to produce. equivalent per day, which was 12 per cent contributed eight per cent of Alberta’s total As more information becomes available, the higher than the second quarter of 2010 as a marketable gas production, which the ERCB production potential will become clearer. result of successful drilling, acquisitions and third-party production. The company drilled projects will increase to 13 per cent by 2020. Approximately 95 per cent of the coalbed 320 net wells and brought 538 new wells on methane wells drilled in Alberta have targeted stream. For 2011, it plans to drill 450 net wells. Shale gas: the thinner coal seams in the Horseshoe Shale gas exploration and development in Encana also reports it is doing more pad drilling Canyon (gas in place 71 trillion cubic feet) the Western Canadian Sedimentary Basin and Belly River coal zones along the Calgary– this year to allay land disturbance concerns in has undoubtedly been accelerated by the Red Deer corridor. Wells targeting these seams more populated rural operating areas, but also continued success of several prolific U.S. tend to produce gas with little or no water. The to reduce its supply cost on this resource play shale basins. depth range of these coals is 200–800 metres. to around $3 per thousand cubic feet. The potential for Canadian shale gas Most of the remaining CBM wells drilled The top producers from the Horseshoe production is still being evaluated. In have targeted the deeper Mannville coals Canyon coals are Encana, Quicksilver, Nexen northeastern British Columbia, the most (gas in place 239 trillion cubic feet). These Inc., and Apache Canada Ltd. Nexen and advanced shale gas plays are found in the coals tend to be thicker, deeper and more Trident Exploration are the leaders in the Horn River Basin, and to a lesser extent in the continuous with substantial saline (salt) water Mannville coals. Cordova Embayment. A number of companies production. The depth range of these coals is According to an Energy Resources Conservation exploring in these regions have advanced 900–1,500 metres. Board’s (ERCB) 2010 summary of reserves and their exploration efforts to a point where Despite depressed natural gas prices over production, CBM contributed 261 million cubic pilot projects with multiple wells have been the past few years, Encana Corporation, feet and “activity in CBM has increased from completed and natural gas is being produced ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE 11

and sold via the Spectra pipeline system. Large-scale commercial development will be dependent on market conditions.

According to the ERCB, shale gas exploration and production is in its infancy in Alberta, so currently there is limited data to estimate the shale gas resource potential in the province. Knowledge obtained from American projects indicates that shale gas has the potential to add substantially to Alberta’s resource and reserve base. The ERCB is currently evaluating the shale gas resource potential of all prospective shale gas formations in Alberta.

Current exploration and production is constrained by poor market conditions, but two new emerging plays in Alberta are the deep Duvernay Formation and Colorado Group shales located in the western part of the province. Limited testing has taken place with encouraging results, but no commercial projects have been developed to date.

Tight gas: The Western Canadian Sedimentary Basin is host to most of Canada’s conventional natural gas resources and within this basin, the northern and western regions contain much of the tight gas potential.

Total original gas in place (OGIP) is estimated at 1,311 trillion cubic feet. Other regions within Canada, specifically the Mackenzie Delta in the Arctic and the Albert Formation in the Maritimes, are believed to have tight gas resource potential, but no estimates have been made due to lack of geological data. pipeline hydrocarbon dew point specifications. metres (716 million barrels). The remaining While the OGIP value is very large, only Field plants may send recovered NGL mix to established reserves of other NGLs—propane, a portion of these resources are deemed centralized, large-scale fractionation plants butane and pentanes plus—is 148 million technologically recoverable. Marketable where the mix is fractionated in specification cubic metres (932 million barrels). resources are estimated at between 230 and products. Gas reprocessing plants, often referred All of the specification ethane extracted from 509 trillion cubic feet, with half attributed to to as straddle plants, recover NGL components natural gas was used in Alberta as feedstock. the Deep Basin and the Montney in Alberta, or NGL mix from marketable gas and are usually The petrochemical industry in Alberta is the and the rest to various accumulations in located on the main gas transmission pipelines major consumer of ethane recovered from northeastern British Columbia. at border delivery points. natural gas, with four plants using ethane as feedstock for the production of ethylene. The Natural Gas Liquids (NGLs): In Alberta, there are about 550 active gas processing plants that recover NGL mix petrochemical industry in Alberta is benefiting Natural gas liquids (NGLs) are recovered or specification products, 10 processing from the low gas price environment since the mainly from the processing of natural gas in plants that fractionate NGL mix streams into price of ethane is linked to natural gas prices. Alberta. Field gas-processing facilities ensure specification products and nine straddle plants. The Alberta ethylene industry continues that natural gas meets the quality specifications to maintain its historical cost-advantage of the rate-regulated natural gas pipeline Remaining established reserves of extractable for ethylene production compared to other systems, which require removal of NGLs to meet ethane is estimated to be 113 million cubic regions in North America. 12 ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE

ALBERTA CROWN LAND SALES P&NG rights, excluding oil sands

4

3.5

3

2.5

2

1.5

Price in billions C$ Price 1

.5

$0 2011 2010 2007 2005 2009 2006 2008

Source: Alberta Energy

Drilling RIg Count by Province/Territory Oil & Gas Well Completions By Province/Territory Western Canada June 12, 2012 Western Canada May 2012

Active Down Total activE OIL WELLS gas wells

(Per cent Western Canada Western Canada May 2012 May 2011 May 2012 May 2011 of total)

Alberta 153 430 583 26% Alberta 296 616 61 187

British Columbia 18 35 53 34% British Columbia 6 10 69 46

Manitoba 10 13 23 43% Manitoba 18 0 0 0

Saskatchewan 75 62 137 55% Saskatchewan 83 136 0 32

WC Total 256 540 796 32% Total 403 762 130 265

New Brunswick 0 2 2 0% Northwest Territories 2 0 0 0

Source: JuneWarren-Nickle’s Energy Group Source: JuneWarren-Nickle’s Energy Group

DRILLING ACTIVITY IN ALBERTA, 1950–2010

25,000

Gas (includes CBM wells)

20,000 Bitumen (includes producing and evaluation wells) Crude oil Other (includes unsuccessful, service and suspended wells) 15,000

10,000 Number of wells drilled Number of wells

5,000

0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Energy Resources Conservation Board 2012 2011 2010 2009 2008

ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE 13

Top 25 Gas Producers in Alberta (as of June 14, 2012) • Only gas from gas and conventional oil wells was considered; gas from bitumen wells was not included. • Gas from commercial gas storage schemes was excluded.

1600 2012 1400 1200 2011 1000 800 2010 600 400 2009

Production (mmcf/d) Production 200 0.0 2008 hell Canada Energy uncor Energy Canadian Natural Resources Limited ConocoPhillips Canada Encana Corporation Husky Oil Operations Limited Devon Canada S Cenovus Energy Inc. Apache Canada Ltd. NorthTAQA Ltd. Penn West Petroleum Ltd. S ResourcesPartnership Bonavista Energy Corporation Peyto Exploration & Development Corp. Talisman Energy Inc. Direct Energy Marketing Limited Tourmaline Oil Corp. Pengrowth Energy Corporation Harvest Operations Corp. Advantage Oil & Gas Ltd. TrilogyResources Ltd. MidstreamATCO Ltd. TransCanada PipeLines Limited NAL Resources Limited Perpetual Energy Trident Exploration (Alberta) Corp.

Source: Energy Resources Conservation Board

Alberta marketable Gas production Alberta marketable Gas demand

20 Conventional CBM Shale 10 20 Alberta gas exports Residential demand Alberta plant gate price Commercial demand Other Alberta demand

8 15 15

6

10 10 4 Production (bcf/d) Production

5 (C$/gigajoules) Price 5

2 and demand (bcf/d) Production

0 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Source: Energy Resources Conservation Board Source: Energy Resources Conservation Board

TOTAL PRIMARY ENERGY PRODUCTION IN ALBERTA

16,000 7.2

14,000 Actual Forecast 6.3 NGLs 12,000 5.4 Coalbed methane 10,000 4.5

8,000 Conventional natural gas 3.6

6,000 Mined and in situ bitumen 2.7 Production (petajoules) Production 4,000 1.8

Conventional heavy oil 2,000 0.9 Conventional light and medium oil Production (million bbls/d of crude oil equivalent) (million bbls/d Production 0 Coal 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Energy Resources Conservation Board 14 ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE

Coalbed methane: Flaring: Glossary Natural gas generated during the coalification process Controlled burning of natural gas that cannot be and trapped within coal seams, commonly referred to processed for sale because of technical or economic as natural gas from coal. reasons. The biggest portion is solution gas flaring, which involves the burning of natural gas produced of natural gas Commingled gas: along with crude oil and bitumen. A homogeneous mix of natural gas from various physical (or contractual) sources. Fracturing (or fracking): terms A reservoir stimulation technique in which fluids are Completion: pumped into a potentially productive formation under Preparing a newly drilled well for production; usually high pressure to create or enlarge fractures allowing involves setting casing—pipe that lines the interior of a the oil or gas to flow from the zone at higher rates. Abandoned well: well to prevent caving and protect against groundwater In some operations, proppants such as frac sand A well that is permanently shut down because it was a contamination—and perforating the casing to establish are injected with the frac fluid to help hold the rock dry hole or because it has ceased to produce crude oil communication with the producing formation. fractures open. or natural gas. Compressed natural gas (CNG): Gas: Acid gas: Natural gas in its gaseous state that has been One of the three states of matter, gas is Hydrogen sulphide (H2S) or carbon dioxide (CO2) or a compressed to about one per cent of its volume and characterized by having neither shape nor specific combination of H2S and CO2, which are referred to as stored at 20,000–27,500 kilopascals. volume; it expands to fill the entire container in which acid gases because they form acids or acidic solutions it is held. in the presence of water. Condensate: A mixture of hydrocarbons consisting primarily of Gas processing plant: Audits: pentanes and heavier liquids extracted from natural gas. Any facility that performs one or more of the following: Actions taken by staff or a third party to help measure While it can be used to make gasoline, jet fuel and other removing liquefiable hydrocarbons from wet gas or a company’s compliance with legislation and internal products, it is primarily used in Alberta as diluent. casinghead gas; removing undesirable gaseous and requirements, and to identify opportunities for particulate elements from natural gas; removing water improvement. Audits can involve field inspections, Conventional gas: or moisture from the gas stream. interviews with management and document review. Natural gas that can be produced using recovery techniques normally employed by the oil and gas Gas reservoir: Blowout preventer (BOP): industry. The distinction between conventional and A porous and permeable rock formation in which Equipment that is installed at the wellhead to control unconventional gas is becoming less clear. See also natural gas accumulates. pressures and fluids and to prevent uncontrolled fluid unconventional gas. flow from the reservoir during drilling, completion and Gas transmission systems: certain remedial operations to restore production. Deep cut: Pipelines that carry natural gas at high pressure from The processes that recover NGLs from natural gas producing areas to consuming areas. Broker: in excess of amounts required for sales gas to meet An individual or independent corporation engaged in pipeline specifications. Gathering system: bringing together sellers and buyers of natural gas, A system of small-diameter plastic or steel pipes assisting in negotiations, and arranging transportation Deliverability: (gathering lines) transporting natural gas from and delivery terms. Brokers usually do not buy or sell The amount of natural gas a well, field, gathering, producing wells to field facilities. for their own account, but act as an agent for the buyer transmission or distribution system can supply in a

and/or seller. given period of time. Horizontal drilling: Burner-tip: Directional drilling: Drilling horizontally through a reservoir to increase the exposure of the formation to the well. The point of end-use consumption of a particular fuel, Drilling a wellbore at any angle other than vertical; such as natural gas or residual fuel oil. used where the rig cannot be set up directly over the Hydrocarbons: target, or to drill more than one hole from a single A large class of liquid, solid or gaseous organic Burner-tip price: location. The price of natural gas (or other fuels) paid by the compounds, containing only carbon and hydrogen, final consumer. For natural gas, this includes the price Downstream: which are the basis of almost all petroleum products. of the gas plus the cost of processing, gathering, The refining and marketing sector of the petroleum transmitting and distributing it. industry. Hydrogen sulphide (H2S): A naturally occurring, highly toxic gas with the odour of rotten eggs. Butane (C4H10): Dry gas: A natural gas liquid (NGL) used as a household Natural gas from the well that is free of liquid fuel, refrigerant and aerosol propellant and in the hydrocarbons, or gas that has been treated to remove Inert gases: manufacture of synthetic rubber. all liquids; pipeline gas. Gases that are unable to or unlikely to react with any other substance. Caprock: Energy Resources Conservation Board Impermeable rocks such as shale that overlie the (ERCB): Injection (oil and gas): reservoir rock and trap natural gas and crude oil in An independent, quasi-judicial agency of the Injection enhancement technique wherein water or the reservoir. Also, impermeable rock overlying a Government of Alberta. Its mission is to ensure that other substances are injected into an oilfield to improve geothermal reservoir. Also called sealing rock. the discovery, development and delivery of Alberta’s production. Also, the re-injection of natural gas into an energy resources take place in a manner that is fair, oilfield to maintain reservoir pressure. Carbon dioxide (CO2): responsible and in the public interest. A non-toxic gas produced from decaying materials, Inlet separation: respiration of plant and animal life, and combustion of Established reserves: The initial stage of processing at a natural gas organic matter, including fossil fuels; carbon dioxide Generally defined as proved reserves, plus one half processing plant where the incoming raw gas stream is the most common greenhouse gas produced by probable reserves. enters a vessel and any free liquids, such as water and human activities. NGLs, are removed from the gas stream before it is further processed. Ethane (C2H6): Carbon monoxide (CO): An NGL, the uses of which include enhanced Colourless, odourless, poisonous gas produced by oil recovery, as a fuel and as a feedstock for the incomplete combustion of fossil fuels. petrochemical industry. ALBERTA NATURAL GAS INDUSTRY QUARTERLY UPDATE 15

Land: Operator: Solution gas: In the petroleum industry, “land” often refers to the oil The company responsible for managing an exploration, Natural gas that is dissolved in crude oil in and gas rights on a particular area of land. For example, development or production operation. underground reservoirs. When the oil comes to the in a “land sale,” the oil and/or gas rights are “sold” surface, the gas expands and comes out of the oil. (although in reality the rights are leased). Orphan wells: Wellsites for which the licence operators have ceased Sour gas: Landman: to exist or cannot be traced. Raw natural gas with a relatively high concentration A male or female member of the exploration team of sulphur compounds, such as hydrogen sulphide. All whose primary duties are managing a petroleum Pentane (C5H12): natural gas containing more than one per cent hydrogen company’s relations with its landowners and partners, A hydrocarbon compound consisting of five carbon sulphide is considered sour. About 30 per cent of including securing and administering oil and gas leases atoms and 12 hydrogen atoms. Canada’s natural gas production is sour, most of it and other agreements. Other duties include helping found in Alberta and northeastern British Columbia. to formulate exploration and development strategies. Petroleum: Also known as a land agent or land person. A naturally occurring mixture composed predominantly Source rock: of hydrocarbons in the gaseous or liquid phase. The rocks in which hydrocarbons are created or Lease agreement: sourced from carbohydrates through heat and The negotiated legal document giving an oil and gas Probable reserves: pressure. Source rocks are often black shales. company the right to utilize the surface lease site to Reserves believed to exist with reasonable certainty drill for and produce oil or gas. based on geological information. Straddle extraction plant: A gas processing plant located on or near a gas Liquefied natural gas (LNG): Propane (C3H8): transmission line that removes natural gas liquids from Supercooled natural gas that is maintained as a liquid An NGL used as a fuel (i.e.: in barbeques, the gas and returns it to the line. at or below -160°C; LNG occupies 1/640th of its transportation and heating of households in original volume and is therefore easier to transport if areas where natural gas supply is not available). Sulphur recovery: pipelines cannot be used. Sour gas is processed at recovery plants to extract sulphur Proppant: for sale to fertilizer manufacturers and other industries Manufactured gas: Sand, or ceramic or resin beads pumped into a wellbore in Canada and overseas. The average rate of sulphur A gas obtained by destructive distillation of coal, by at the end of the fracturing process to prop open newly recovery at Alberta’s sulphur recovery plants has improved the thermal decomposition of oil or by the reaction of induced fractures and enhance permeability. from 97.5 per cent in 1980 to 98.8 per cent in 2000. steam passing through a bed of heated coal or coke. Examples are coal gases, coke or oven gases, producer Proved reserves: Sweet gas: gas, blast furnace gas, blue (water) gas or carbureted Reserves that can be economically produced with a Raw natural gas with a relatively low concentration of water gas (also known as syngas). large degree of certainty from known reservoirs using sulphur compounds, such as hydrogen sulphide. existing technology. Methane (CH4): Syngas: Methane consists of one carbon atom and four Raw natural gas: A fuel produced from solid hydrocarbons such as coal hydrogen atoms and is the largest component of A mixture containing methane plus all or some of and petroleum coke. The process uses steam, air and natural gas. Methane remains in a gaseous state at the following: ethane, propane, butane, condensates, controlled amounts of oxygen to break the solid down, relatively low temperatures and pressures. Methane is nitrogen, carbon dioxide, hydrogen sulphide, helium, and the resulting gas consists of vaying amounts of also produced when organic matter decomposes. hydrogen, water vapour and minor impurities. Raw carbon monoxide and hydrogen. natural gas is the gas found naturally in the reservoir Midstream sector: prior to processing. Tight gas sands: Primarily the processing, storage and transportation Natural gas that is found in sandstone with low sector of the energy industry. Recoverable resources: permeability. Hydrocarbon reserves that can be produced with Mineral rights: current technology, including those not economical to Trunk lines: The rights to explore for and produce the resources produce at present. Large-diameter pipelines that transport crude oil, below the surface. In the petroleum industry, mineral natural gas liquids and refined petroleum products to rights can also be referred to as “land.” Renewable energy: refineries and petrochemical plants; some trunk lines Naturally occurring energy sources that are continually also transport refined products to consuming areas. National Energy Board (NEB): replenished. Examples of renewable energy are wind, The federal regulatory agency in Canada that solar and water. Unconventional natural gas: authorizes oil, natural gas and electricity exports; In the case of natural gas from coal, natural gas from certifies interprovincial and international pipelines, Reserves: tight sands and shale gas, conventional gas found in and designated interprovincial and international power Recoverable portion of resources available for use based unconventional reservoirs or reservoirs requiring special lines; and sets tolls and tariffs for oil and gas pipelines on current knowledge, technology and economics. production methods or technologies; in the case of gas under federal jurisdiction. hydrates, conventional methane in an unconventional Reservoir (oil and gas): form occurring in a conventional reservoir. Natural gas: A porous and permeable underground rock formation Gaseous petroleum consisting primarily of methane containing a natural accumulation of crude oil or Upstream: with lesser amounts of (in order of abundance) ethane, natural gas that is confined by impermeable rock or Refers to companies that explore for, develop propane, butane and pentane, and heavier hydrocarbons water barriers, and is separate from other reservoirs. and produce petroleum resources (in contrast, as well as non-energy components such as nitrogen, downstream refers to the refining and marketing carbon dioxide, hydrogen sulphide and water. Sales gas: components of the industry). Natural gas that has been treated in a natural gas Natural gas liquids (NGLs): processing facility and is suitable for sale. Some Western Canadian Sedimentary Basin Liquids obtained during production of natural gas, of the processes that natural gas may undergo are (WCSB): comprising ethane, propane, butane and condensate. inlet separation, gas treating, dehydration and NGL Canada’s largest region of sedimentary rocks; the recovery, before it enters a transmission pipeline for largest source of current oil and gas production, Non-associated gas: eventual transportation to market. covering all of Alberta and parts of Manitoba, Natural gas that is produced from reservoirs that Saskatchewan, British Columbia and the Yukon. contain only natural gas, and is therefore not Shale gas: associated with crude oil production. Natural gas that is trapped within shale formations. Wet gas: Shales are fine-grained sedimentary rocks that can be Raw natural gas with a relatively high concentration rich sources of petroleum and natural gas. of natural gas liquids (ethane, propane, butane and condensates). CONTACTS

Industry Associations

• Alberta Land Surveyor’s Association www.alsa.ab.ca • Canadian Association Geophysical Contractors www.cagc.ca • Canadian Association of Oilwell Drilling Contractors www.caodc.ca • Canadian Association of Petroleum Producers www.capp.ca • Canadian Energy Pipeline Association www.cepa.com • Canadian Gas Association www.cga.ca • Canadian Natural Gas www.canadiannaturalgas.ca • Canadian Natural Gas Vehicle Alliance www.cngva.org • Canadian Society of Exploration Geophysicists www.cseg.ca • Canadian Society of Petroleum Engineers www.speca.ca • Canadian Society for Unconventional Resources www.csur.ca • Gas Processing Association Canada www.gpacanada.com • Petroleum Services Association of Canada www.psac.ca • Petroleum Technology Alliance Canada www.ptac.org • Small Explorers and Producers Association of Canada www.sepac.ca

Alberta Government

• Alberta Energy www.energy.gov.ab.ca • Alberta Environment and Sustainable Resource Development www.srd.alberta.ca • Alberta Enterprise & Advanced Education www.eae.alberta.ca • Energy Resources Conservation Board www.ercb.ca • Alberta Innovates www.albertainnovates.ca • Alberta Geological Survey www.ags.gov.ab.ca • Alberta Surface Rights Board www.surfacerights.gov.ab.ca

For more information, visit us at www.albertacanada.com